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The duty of disclosure - Statutory Developments
Dr. Dimitrios Christodoulou
Assistant Professor of law
Athens University
School of Law

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1. Greek law- Art. 3 Law 2496/1997
At the time of the conclusion of the contract, the policyholder has the duty to disclose to the insurer any and all information or circumstances of which he is aware, and which are objectively material for the assessment of the risk. He must also answer every relevant question asked by the insurer.
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2. Greek law- Art. 3 Law 2496/1997
In case the insurer has set clear written questions to the policyholder, then it is presumed that the information and circumstances in relation to those questions constitute the sole grounds on which the insurer based his assessment and acceptance of such risk.
If the insurer concludes the contract based on written questions, he cannot later rely on the fact that:
a. specific questions remained unanswered;
b. circumstances which were not the subject matter of a question were not disclosed; or
c. an obviously incomplete answer was given to a general question, unless the other contracting party has made such a response with intention to deceive the insurer.
The insurer may not rely against the policyholder upon inadequate or defective answers to the questionnaire unless they were intentionally given.
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4. 3. Greek Law – Remedies for breach of duty
Breach of duty of disclosure due to no fault
(Art. 3§3 Law 2496/1997)
Within a period of one month following the insurer's discovery the insurer is entitled to:
terminate the contract. In this case, termination of the insurance contract by the insurer comes into effect following the lapse of fifteen days from the date when the relevant notice reaches the policyholder, or
(b) request that the contract be amended.
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5. 4. Greek Law – Remedies for breach of duty
Breach of duty of disclosure due to negligence
Art. 3§5 Law 2496/1997
Insurer has all the rights as in the case of breach of the duty due to no fault.
If the insured risk materializes prior to the amendment of the insurance contract, or before the termination comes into effect, the insurance compensation shall be reduced in proportion to the difference between the premium payable and the premium which would have been demanded if the failure to disclose had not occurred.
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6. 5. Greek Law – Remedies for breach of duty
Breach of duty of disclosure due to fraud
Art. 3§6 Law 2496/1997
Insurer is entitled to terminate the contract within one month from the date on which the insurer acquired knowledge of the breach.
Termination takes immediate effect.
If the insured risk materializes within the above-mentioned period, the insurer shall be released from the obligation to pay the insurance indemnity. Further, the policyholder is liable to compensate the insurer for any loss he sustained because of the breach of the duty of disclosure.
The insurer is entitled to collect the premiums due and payable at the date when the termination of the contract takes effect, or at the time when the insured risk occurred.
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7. 6. Scope of Application
The Insurance Act 2015 applies to non-consumer insurance contracts.
A consumer insurance contract is a contract of insurance between
an individual who enters into the contract wholly or mainly for purposes unrelated to the individual’s trade, business or profession, and
a person who carries on the business of insurance and who becomes a party to the contract by way of that business (whether or not in accordance with permission for the purposes of the Financial Services and Markets Act 2000);
(Consumer Insurance (Disclosure and Representations) Act 2012 s.1)
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8. 7. The changes introduced by the Insurance Act 2015-
The duty of “Fair Presentation” of the risk
New remedies for Non-Disclosure and misrepresentation
Warranties and other terms
Fraudulent claims
Contracting Out and the Transparency Requirements
The Third Parties (Rights against Insurers) Act 2010
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9. 8. MIA 1906 s. 17 Insurance is uberrimæ fidei.
“A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.”
duty of disclosure (s. 18, 19)
duty not to misrepresent (s. 20)
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IA 2015 s. 14. Any rule of law permitting a party to a contract of insurance to avoid the contract on the ground that the utmost good faith has not been observed by the other party is abolished.
The amended s. 17 MIA1906 now reads:
A contract of marine insurance is a contract based upon the utmost good faith (and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party)
IA 2015 repeals ss of MIA 1906 as well as any rule of law to the same effect as any of those provisions is abolished.
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11. 10. The duty of Fair Presentation of the Risk IA 2015 s. 3
Fair presentation of the risk is one that makes the disclosure,
(i) of every material circumstance which the insured knows or ought to know, or
(ii) failing that, disclosure which gives the insurer sufficient information to put a prudent insurer on notice that it needs to make further enquiries for the purpose of revealing those material circumstances
Disclosure in a manner which would be reasonably clear and accessible to a prudent insurer
The duty not to make misrepresentations
A fair presentation need not be contained in only one document or oral presentation
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11. The duty not to make misrepresentations is based on the current MIA 1906 s. 20
(1) Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.
(2) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.”
(3) A representation as to a matter of fact is true, if it be substantially correct, that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer.”
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13. 12. Material circumstance or representation (IA 2015 s. 7)
The term “circumstance” includes any communication made to, or information received by, the insured (MIA 1906 s. 18(5))
A circumstance or representation is material if it would influence the judgment of a prudent insurer in determining whether to take the risk and, if so, on what terms. (MIA 1906 s. 18(2) and s. 20(2))
A material representation is substantially correct if a prudent insurer would not consider the difference between what is represented and what is actually correct to be material
Examples of things which may be material circumstances are —
(a) special or unusual facts relating to the risk,
(b) any particular concerns which led the insured to seek insurance cover for the risk,
(c) anything which those concerned with the class of insurance and field of activity in question would generally understand as being something that should be dealt with in a fair presentation of risks of the type in question.
A material representation is substantially correct if a prudent insurer would not consider the difference between what is represented and what is actually correct to be material.
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13. Materiality Pan Antlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] All ER 581
1. Objective prudent insurer test
Everything is material to which a prudent insurer, if he were in the specific insurer’s place would wish to direct his mind in the course of considering the proposed insurance with a view to deciding whether to take it up and on what terms, including what premium to charge.
Materiality is to be assessed at the date of making of the contract of insurance and not in the light of subsequent events (Inversiones Manria SA v. Sphere Drake Insurance Co. , The Dora [1989] 1 Lloyd’s Rep. 69).  
Materiality must be assessed by reference to an individual fact. Thus a group of facts none of which is material in its own right cannot be aggregated to amount to a failure by the assured to make a fair presentation (North Shipping Ltd. v. Sphere Drake Insurance plc). 
The burden of proof for breach of the duty of utmost good faith lies on the insurer who needs to prove that the material withheld was indeed material. Proof of materiality is a question of fact MIA 1906 s. 18(4).
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14. Materiality
2. Subjective inducement test
Was the actual underwriter influenced by the assured’s failure to disclose the information in question?
The misrepresentation or the non-disclosure need to be an effective cause of the actual insurer entering into the contract but need not be the sole cause (Assicurazioni Generali SpA v. Arab Insurance Group [2003] Lloyd’s Rep IR 131). 
Even if evidence of actual inducement is presented, it is open to the court to hold that the insurer could not have been influenced by the fact in question (Kausar v. Eagle Star Insurance Co Ltd [2000] Lloyd’s Rep IR 154; Laker Vent Engineering Ltd v. Templeton Insurance Ltd [2009] EWCA Civ 62).
The insurer has the burden of proof that there was an inducement upon which he relied.
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15. s. 8(1) of the IA 2015:
“The insurer has a remedy against the insured for a breach of the duty of fair presentation only if the insurer shows that, but for the breach, the insurer — (a) would not have entered into the contract of insurance at all, or (b) would have done so only on different terms.”
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17. 16. Examples of material facts
- Physical Hazard
Refers to the risks that are related to the physical characteristics of the subject matter insured.
Where the vessel is moored
The characteristics of ports of lading and discharge of cargo may be material in cases regarding insurance against demurrage claims
Weather conditions
Previous loss experiences
Moral Hazard
Generally refers to the characteristics of the insured.
Rumors
Pending criminal/civil charges
Pending charges against the insured’s employees
Dishonesty of the insured
Overvaluation
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18. 17. Knowledge of insured s. IA 2015 s.4 (2), (3)
An insured who is an individual knows only
(a) what is known to the individual, and
(b) what is known to one or more of the individuals who are responsible for the insured’s insurance (MIA 1906 s. 19)
An insured who is not an individual knows only what is known to one or more of the individuals who are
(a) part of the insured’s senior management, or
(b) responsible for the insured’s insurance
“senior management” means those individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed or organised [s. 4(8)(c)]. This is likely to include members of the BoD but may extend beyond this, depending on the structure and management hierarchy of the insured
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19. 18. Knowledge of insured IA 2015 s.4 (4), (5)
However, an insured is not taken to know confidential information known to an individual if
(a) the individual is, or is an employee of, the insured’s agent; and
(b) the information was acquired by the insured’s agent (or by an employee of that agent) through a business relationship with a person who is not connected with the contract of insurance.
The persons connected with a contract of insurance are
(a) the insured and any other persons for whom cover is provided by the contract, and
(b) if the contract re-insures risks covered by another contract, the persons who are (by virtue of this subsection) connected with that other contract.
An individual is responsible for the insured’s insurance if the individual participates on behalf of the insured in the process of procuring the insured’s insurance (whether the individual does so as the insured’s employee or agent, as an employee of the insured’s agent or in any other capacity). (s. 4(8)(b)).
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20. 19. Knowledge of insured IA 2015 s.4 (6), (7)
Insured ought to know what should reasonably have been revealed by a reasonable search of information available to the insured (whether the search is conducted by making enquiries or by any other means).
“Information” includes information held within the insured’s organisation or by any other person (such as the insured’s agent or a person for whom cover is provided by the contract of insurance).
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21. 20. BLIND-EYE knowledge IA 2015 s. 6
An individual’s knowledge include not only actual knowledge, but also matters which the individual suspected, and of which the individual would have had knowledge but for deliberately refraining from confirming them or enquiring about them   
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21. Facts that need not be disclosed IA 2015 ss. 3(5) and 5 (MIA 1906 s. 18(3))
In the absence of enquiry, the insured is not required to disclose a circumstance if (a) it diminishes the risk, (b) the insurer knows it, (c) the insurer ought to know it, (d) the insurer is presumed to know it, (e) it is something as to which the insurer waives information.
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23. 22. Remedies for breach Qualifying Breach - IA 2015 s. 8
A breach for which the insurer has a remedy against the insured is referred to in this Act as a “qualifying breach”.
A qualifying breach is either —
Deliberate or reckless, or
Neither deliberate nor reckless.
A qualifying breach is deliberate or reckless if the insured —
Knew that it was in breach of the duty of fair presentation, or
Did not care whether or not it was in breach of that duty.
It is for the insurer to show that a qualifying breach was deliberate or reckless.
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24. 23. Remedies for breach (IA 2015, Sch 1, Part 1)
If a qualifying breach was deliberate or reckless, the insurer —
(a) may avoid the contract and refuse all claims, and
(b) need not return any of the premiums paid.
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25. 24. Remedies for breach - Proportionality
If a qualifying breach was neither deliberate nor reckless:
(a) If, in the absence of the qualifying breach, the insurer would not have entered into the contract on any terms, the insurer may avoid the contract and refuse all claims, but must in that event return the premiums paid.
(b) If the insurer would have entered into the contract, but on different terms (other than terms relating to the premium), the contract is to be treated as if it had been entered into on those different terms if the insurer so requires.
In addition, if the insurer would have entered into the contract (whether the terms relating to matters other than the premium would have been the same or different), but would have charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim. “Reduce proportionately” means that the insurer need pay on the claim only X% of what it would otherwise have been under an obligation to pay under the terms of the contract (or, if applicable, under the different terms provided for by virtue of paragraph 5), where—
Premium actually charged
X = x100
Higher premium
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Final remarks
As with any new legislation, there will be initial uncertainty over the interpretation of new concepts and the changes introduced.
Reliance on expert advice should be increased (what higher premiums should be charged).
At the underwriting stage, it can be expected that the changes will encourage both the insurer and the insured to ask more questions of each other, which may in turn increase the role and responsibility of brokers.
The Insured and/or their brokers may wish to develop criteria for carrying out reasonable searches and seek increased input from the insurers during the underwriting stage.
Ensure that information is presented in a way which allows insurers to understand the risk – key points cannot be buried amongst less relevant information.
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